IMAX Corp (USA) (IMAX)

IMAX is a solid long term investment. It has a stellar brand name, superior technology, and is positioned to profit from current trends. However, it is in trouble with litigation from a creditor and has delayed financial disclosures. It has not had a profitable year since 2005. They probably won't start to make money until the end of this year.

Movie goers will drive to a far away cinema and pay a substantial premium to have an "IMAX experience." IMAX films are huge. The screen fill your entire field of view bringing you into the film. They run the movie at 48 frames per second instead of the standard 24. This makes fast action much smoother and brings out details of fast movie objects. 24 frames per second really is too slow for any movie with even moderately fast motion. Even DVD is 30 frames per second. HDTV can be up to 60. If you are actually interested in investing watch "Dark Night" at an IMAX theater when it comes out. Even if a competitor came out with a better system people will still demand IMAX because of the "IMAX experience" brand.

I briefly mentioned that HDTV has a higher frame rate than standard films. It also has equivalent picture quality. In some cases better because HDTV does not have the jitter of standard film projectors (IMAX fixes this with a proprietary system). Its cheaper to rent a movie than to watch it in a theater. Because of this I almost never go to the theater anymore. According to the MPAA, admissions are down from 1.44 billion in 2001 and 1.6 billion in 2002 to 1.4 billion in 2007.

Despite sales being hampered by customers wanting to wait for digital IMAX, over the last few months, IMAX has inked a huge number of deals for new IMAX theaters around the world with AMC, Brasil, and China. Once the digital system is ready in the second half of 2008, these sales will increase.

The digital format will be great for IMAX. Right now, IMAX films are very expensive to shoot, edit, and print because the film is so expensive making studios hesitant to release an IMAX film. After switching to digital, film costs will almost not exist.

This stock has underperformed for the past year and now represents a value if management can get its act together and unleash the value. Also 2007 represents a better slate of movie releases than 2006.

The stock has been punished big time, but the fundamentals and outlook seem to remain strong. There is always the wildcard that something more was happening with the revenue recognition, but we're just letting our minds run a bit to free on that one.. even the SEC calls it for what it is.. a matter of timing.. not fabricating. I think it will take 4 quarters to earn the trust back, but expansion continues and blockbusters like Spidy3 and more Hogwarts will keep this company moving. There is always still the outside chance of a buyer at lower prices than management was looking for.. but I'd let those thoughts pass and simply focus on their core business at this point. Go to the Movies. Visit an IMAX.. is there any better way to enjoy the "Big Screen"?

IMAX is on in case you haven't noticed. The problems of the recent past have all been resolved and the company has a solid plan and is ready to take off. They continue to break showing records and have secured many lucrative contracts including one with AMC that is worldwide. All the big name titles have been released on the format (Spider-Man, Superman) which only helps to spread the name. In the next five years we all will be watching the blockbusters on gigantic 3-D screens and the fortunate few will be enjoying the profits.

Irrational exuberance has sent the price of IMAX stock up way too high for its fundamentals. Negative profit margin, operating margin, return on assets, net income, even EBITDA and book value are negative. These are not signs of a healthy business.

As for the new theaters and movie deals, the fact is that there are are very few IMAX theaters. The new theaters that everyone is gushing about are not really IMAX theaters, they are existing standard-size movie theaters with their screens enlarged slightly, because you can't fit a real IMAX screen into a standard movie theater. So they are fake IMAX theaters, trading on the IMAX name to charge $5 extra to see a movie on a screen only slightly bigger. Guess how many repeat customers this will bring. Guess how much this will tarnish the IMAX name.

What a dog! My very first pick as well. Looking for the bounce that seems never to come. Won't those darned stochastics EVER get off their backside? This was a technical pick that has gone nowhere. Forget what they do - forget management - they are only concerned about their stock options. So please will IMAX mgt please award themselves some stock options (... no need to back date like many others have done .... the price has crapped out already) and then we can see the stock rise and rise and rise so that you'll make MANY times your salary. Isn't that what it's all about?

Managment's blunders in 2006 have not fundamentally affected the viability if IMAX's business. This has created an opprtunity to by IMAX stock just as the release of feature films in the IMAX format and more cost effective expansion in the form of joint ventures is taking place. The fact that management did not sell indicates that they have a good view for the value of their franchise, which is substantially higher than the current market price. It is not often one can buy a company with a unique competitive advantage, with a demonstrated market for a P/E of less than 10 based on 2005 earnings (2005 earnings of which are likely to be significantly less than stabilized future earnings as soon as all of the aforementioned factors come into play). IMAX is becoming the must partner for studios and theater chains to drive revenue and offer a unique experience to counteract the trend toward home movies. IMAX is a unique experience which can't be duplicated at home and for which the market is proving that people will pay a premium to view movies on IMAX format. Also a $150 million market cap for a firm with not only great potential, but a proven market appears to be quite low as well. In summary, get in on the bargain while the stock is still on sale!

ripe for acquistion, management determined to get full value or stay the course

Management seems a bit shaky but you can't deny the product. With decked out home theaters becoming more and more common, movie theaters need something different to drive customers to the theater. I believe this will force theater operators (like ticker: RGC) to cozy up to IMAX even though they are currently competitors. The IMAX experience is a great one and can never be replicated at home.

I really like the position IMAX is in to make big gains over the next year. This stock has been beaten up, over the last year, due to the failure of their executives to find a buyer for the company. After which, a lot if investors who were looking for a quick buck, jumped ship. But with an unparalleled product, loyal fan base, and ever growing list of new theaters to install, not to mention an impressive list of blockbusters that are scheduled to be played in their theaters this year; you have a perfect recipe for a depressed stock set to take off. I like this stock so much I have it in my personal portfolio.

The name IMAX stands for (short for Image MAXimum), IMAX is the indisputable leader in large format projection and 3D movie experience around the world, the company, originally from Canada have struggle for years to make profits and interest investors… until now. There are so many reasons why I believe the story will be different now, the industry has changed, IMAX completely modified its business model and digital projection seems to be finally affordable and easy to implement.

Currently the IMAX stock trades at $9,30 and it doesn’t have a P/E ratio yet since last fiscal year ended up with loses (as the previous ones as well).

Why the story is different now… this is the explanation:

IMAX is now commercial
IMAX use to be a great company but focused just on institutional clients, not long ago most of the theaters on the IMAX network were placed on Museums and other institutional sites of general interest, but it was never commercial as it is today. Currently 200 new commercial IMAX theaters are under construction around the world and for the first time in years IMAX will have more commercial theaters than institutional. On 2007 IMAX accounted for 299 theaters and 186 on signed for implementation and construction, in 2008 IMAX theaters accounted for 351 and 213 signed for implementation and construction, This year the company will have more than 400 theaters in operation, out of these more than 400 theaters close that 300 will be commercial against just 120 institutional, no long ago numbers were exactly the opposite where more institutional theaters were in place. The best part of this is that IMAX is participating now from the box office instead charging clients upfront for the installation of large format screen, sound system and digital projection; this means that in the long run IMAX will start to have a residual steady income from every movie release, something that wasn’t happening before.

IMAX entered the Digital Projection Business
This change is part of the new business model of IMAX, in 2008 IMAX introduced “Digital Projection Systems” that doesn’t required platters (for celluloid IMAX films), just this change along have saved studios hundreds of thousands of dollars, the savings as a result of eliminating film prints are considerable as the typical cost of an IMAX film print ranges from $20.000 per 2D print to $45.000 per 3D print. Remove these cost will significantly increased the profit on an IMAX release for a Studio, which provides more incentive for studios to release their films to IMAX theaters.

Digital projection offers more flexibility; so one movie can be easily replace for another at any given moment. Relatively small hard drives with digital movies replaced the 250-to-500 pounds of celluloid IMAX used before; movies can just now be removed temporarily to project an sport event or concert on the same venue; with film prints the process of set up and remove a movie with this flexibility was just a dream. As part of this game IMAX also developed a new technology in 2002 that allow 35mm live action films to be digitally transformed into IMAX’s large-format at a cost of roughly $1 – $1.5 million per film. This creation has allowed IMAX to retain 10% to 15% from the box office on those films. Imax is also leasing digital projection systems to theaters upgrading to digital, that’s also a new income source for the company.

IMAX in now profitable
Over the past three years IMAX was loosing money every single year, but last August 6th things changed dramatically, IMAX reported net income of $2.6 million, or $0.05 per diluted share for the second quarter ended June 30, 2009, compared to a net loss of $12.2 million, or $0.29 per diluted share for the second quarter of 2008. Total revenues increased 94% to $41.0 million, compared to total revenues of $21.2 million last year. The Company generated operating income of $6.5 million, a turnaround of over $14.0 million compared to an operating loss of $7.7 million in the year-ago period. These numbers clearly speak for themselves, there is no way the company will generate looses from now on, I believe IMAX new game and business model is here to stay, there’s no way this company goes back anymore. If next year… being conservative the company revenue grows by 15% we can expect a P/E Ratio on the range of 15 or 20; that said the stock will be easily priced over $15 but in reality most likely close to $20, that’s twice the price is being trade today of 9,30. In other words for every dollar invested today in IMAX you will probably make two by the end of 2010.

IMAX partnerships with large movie studios to release new films
IMAX “know how”, film technology including digital cameras, and projection technology has allow them to partner with movie studios and produce great movies that have became incredible successful, these partnerships include studios overseas as well such as the recent agreement with Huayi Brothers Media Group, the largest movie studio in China just few months ago. These agreements will open the door to IMAX of a new business opportunities, IMAX will became an active participant on the movie production itself and will profit for the commercialization of the films.

The 3D industry has a momentum
We can say Hollywood is 3D ready, big productions houses have decided to go all the way 3D such as DreamWorks, when in 2007 its CEO Jeffrey Katzenberg said that he wanted to do all the films in 3D, and the first of those has been released this year as “Monsters vs. Aliens”. Other studios has been join the trend producing all their movies 3D such as Pixar (UP) or Blue Sky Studios (Ice Age). Not just movie production houses are making great movies for 3D now but also the technology is there, cameras are small enough to film in tight spaces, projectors and screens are affordable and technologically proofed and specially it seems that finally the market is ready for it.

All the analysis of what is happening on this industry makes me think that IMAX will became a big player on the movie entertainment industry, so if you have not considered yet… take a look at the stock go ahead… make a safe investment for 2010.

What's life without a little risk? I own IMAX at 7 something. I thought it was a good deal then, now I think it is a great deal. It is getting easier to build the theaters with leasing deals. It is getting easier to make IMAX movies like Superman and other first run movies. I think over the long run this is a great stock.

The format and sound system has always been and still is awesome. If Hollywood wants to compete with HD and Blue ray home theater systems they need an impressive large screen format. IMAX is it and with the ability to digitally convert film, and more films been shot digitially, IMAX will hit critical mass within 2 years. If they can just keep their act together and continue adding more theaters and making some profit, it will roll. Trust me!

It's obviously been a series of horrible mistakes for the company, this year, and their fundamentals look atrocious. But I like the technology and believe they have a pretty good moat built up around them, and believe that the miserable past few quarters (and possibly next few) will pave the way for extremely positive productivity in the future. Whether they eventually sell or go it alone for the long-term, I think there's a lot of value here as the movie watching experience is in the midst of a key evolutionary period. Anyone that experiences an IMAX theatre leaves a believer in the product, and they are decades away from any point of saturation, so I think the growth will eventually be there (especially with the cost reductions that will ultimately come from the shift to digital projectors).

Should get taken out within 12 months for at least 20% higher than today's closing price of $5.01.

Stock is undervalued due to SEC led witch hunt!

Am I missing something here? We have a firm that has been unprofitable over the past three years. They are provider of what is essentially a "luxury" theatre service. They have negative stockholders' equity and a good chunk of goodwill that even props up that figure a bit. They recently had to do a share offering to raise more capital. Even if they were to go back to 2005 levels of profitability and I add back depreciation and amortization to net income to come up with a free cash flow projection for my DCF analysis, I still only come up with a valuation around $7.

Mind you, I'm using a 11% cost of capital, which I feel is proper for a high-risk company like this, so maybe I could come up with a higher figure using a lower COC - but even with a 9% COC, I come up with a valuation around $9.25. And remember, there are a lot of *ifs* in that analysis. As in, *if* this company goes back to 2005 profitability levels and *if* I can assume that NI + DA is the best measure for a FCF analysis when actual FCFs have not been positive to begin with over the past three years.

I realize they have access to growth markets in India and China. That's a big plus, but I guess I'm still not convinced. I wouldn't go short on this because I haven't done enough research to assume that the market is wrong on India and China growth prospects, but if I were to see it creep to the $9 - $10 range, I'd become very tempted. However, at the current levels, I think this is a good underperform candidate.

oversold , the IMAX theater is the next big thing in the movie business , with TVs getting bigger and better people need more of a reason to pay for a night at the theater IMAX is that reason....

Beaten down...badly. No growth prospects appear to have changed. Still signing global deals to install more theaters.
Drop is due to bad news regarding SEC investigation into revenue recognition and lack of potential buyers. Are these factors? Of course any SEC inquiry is something to evaluate, however, this should not be a big deal. TMF put out a great article following the news release stating that revenue recognition is dealing with WHEN revenue is recognized...not whether it truly is revenue. The money will hit the books one way or another.
Lack of potential suitors...could that be related to an inquiry? Who wants to be involved with the uncertainty of an ongoing investigation?